Freight - reverse charge mechanism

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(A ltd) company is supplying material to our company(BLtd). Material Value is Rs 1 lakh. In addtition to material value they are charging Freight of Rs 80000. They are charging Service tax of Rs 3480 (Rs 80000*30%*14.5%). Is the supplier’s billing method correct? Can they charge Service tax of Rs 3480 in their bill.? Is it necessary for us (ie B ltd) to pay Service Tax of Rs 3480 under Reverse charge Mechanism Basis?
Replies (16)

yes , their method is correct. in case they dont charge, you have to pay Service tax.

you can also give declration for non deductation of service tax. 

The method is correct ..I doubt on RCM @ 30% To the best of my knowledge for Freight its @ 25%, Labour/Manpower @ 75% & Car rental @ 40%.. Please correct if there is any update otherwise above rates are standard for RCM.

w.e.f. 01/04/2015 it is 30% for Freight payments.

@ Mr.Ankit - Will take a note thanks for update, I guess my company is still charging @ 25%.

Rates are correct, but as service provider is a company, they have to pay service tax not service receiver.

Yes, the method of billing is correct. Also, the valuation of service @ 30% is also correct. And RCM will be applicable in this case if the supplier is charging service tax under GTA Service Category. Supplier being a body corporate is irrelevant here, Only the SR should be specified person for applicability of RCM.

I wanna ask in this Case do we deduct TDS before payment if yes so on which amount

TDS is to be deducted at the time of payment/ crediting on amount excl. of service tax.

Under ST only the GTA is liable to ST and if the person  liable to pay for the transpoirtation is the supplier then the company could pay ST on RCM and seek reimbursement from you if in terms of your contract.

However as a lump sum seems to be charged it may nto be the case. Who is issuing the consignment note for the goods reaching your factory you may se. Thjat would sehd a bit more light on this issue. 

Correct method pay service tax 3480

Dear sir,

A Ltd is supplier. Hanuman Transport is issuing Consignement Note to A Ltd. A Ltd pays to Hanuman Transport. We B Ltd has no connection with Hanuman Transport. Since our supplier paid to Hanuman Transport Rs 80000, he is reimbursing it from us Rs 80000 + ST @ 14.5%.  GTA RCM comes only if we B ltd makes payment directly to Hanuman Transport.  I think A ltd is correct in raising ST in his bill. Am I right?

Method is correct. 30% GTA(S.Tax on Freight) shall be paid by supplier (in your case). Supplier already charged service tax to you. So you no need to go for payment. If supplier do not charge service tax after receiving or taking declaration from supplier.
What is the entry in the books of A ltd


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